Q3 Assume the liquidity premium is positive and grows as the term to maturity increases, the yield curve

a.

implied by the liquidity premium theory is always above the yield curve implied by the expectation theory and has a steeper slope.

b.

implied by the liquidity premium theory is the same as the yield curve implied by the expectation theory.

c.

implied by the liquidity premium theory is always below the yield curve implied by the expectation theory and is flatter.

d.

implied by the expectation theory is always above the yield curve implied by the liquidity premium theory and has a steeper slope.